Union leaders urge western premiers to reject Alberta-B.C. pension proposal as solution to unfolding crisis in retirement income

Instead of getting behind ill-conceived "ABC plan," western premiers should use their clout to call for a national pension summit and to discourage Harper and Ignatieff from reaching watered-down deal on EI

DAWSON CITY, YK – Canadians desperately need pension reform, but a new proposal for a government-sponsored supplemental pension plan being floated by the Alberta and B.C. governments may actually make a bad situation worse.

That was the message delivered today by the president of the Alberta Federation of Labour (AFL) and other regional labour leaders as they followed the western premiers and territorial leaders to their annual policy summit, being held this year in Dawson City, Yukon.

"As a result of the global recession and the collapse in equity markets, it has become painfully obvious that our existing patchwork system is not up to the task of providing adequate retirement income for most Canadians," says Gil McGowan.

"But the answer isn't to introduce a meager supplemental program that employers can simply opt out of and which shifts all the risks onto the shoulders of individual Canadians. What we need is a cohesive system that makes a guarantee to Canadians that they won't face the prospect of living in poverty in their old age."

To back up the AFL's argument that the Alberta-B.C. proposal is not the right way to address the unfolding crisis in retirement income, McGowan unveiled an analysis prepared for the Federation by PBI Actuarial, a Vancouver actuarial firm specializing in pension management (click here for analysis and accompanying charts).

The analysis shows that – even when added to existing benefits provided by CPP and OAS – the proposed ABC plan would generate as little as 14 per cent of pre-retirement income for individuals enrolled in the plan – far short of the recommended threshold of 70 per cent.

The ABC plan also gets low marks because it allows employers to opt out and it wouldn't require all employers to match contributions made by individual employees.

Perhaps the biggest drawback, PBI argues, is that the ABC plan would be a defined contribution plan as opposed to a defined benefit plan – meaning that people covered by the plan would run the risk of having their retirement nest egg substantially reduced if they have the misfortune of retiring during an economic downturn (like the one we are currently struggling through).

"The bottom line is that is the ABC plan is at best an awkward band-aid solution," says McGowan. "In fact, we're concerned that the Alberta-B.C. proposal will distract from real reform and provide false hope to the growing number of Canadians who face the very real prospect of living in poverty after they retire."

So instead of getting behind an ill-conceived ABC plan, McGowan and his counterparts from other labour federations called on the western premiers and territorial leaders to use their clout to call for a national pension summit at which all stakeholders could debate fundamental pension reforms – like the dramatic expansion of the existing Canada Pension Plan (CPP). A growing chorus from labour, business and academia now see the CPP – which provides a defined benefit – as the best and easiest vehicle for reform.

McGowan and other labour federation leaders also said the western premiers and territorial leaders should actively and aggressively discourage Prime Minister Stephen Harper and federal Official Opposition Leader Michael Ignatieff from reaching a "watered-down deal" on employment insurance.

"Workers in western Canada are being unfairly discriminated against by arbitrary rules that make it much harder for them to qualify for the EI benefits they've paid for. But it's not clear that the new pact between the federal Conservatives and Liberals will do anything to address this fundamental inequity," says McGowan.

"If the western premiers are really serious about helping their citizens weather this recession they need to make sure that Harper and Ignatieff aren't allowed to wiggle off the hook by stalling and offering half-measures. An amazing consensus has emerged in Canada calling for one national standard for eligibility and increased benefits for workers who lose their jobs. The western premiers should make it clear they simply won't settle for half a loaf."

NOTE: McGowan and the leaders of other western provincial and territorial labour federations are in Dawson City with the premiers. They will hold a media availability this morning at 9:30 a.m. at the Yukon Order of Pioneers (YOOP) Hall, located at the corner of King Street and Second Avenue.

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For more information call:

Gil McGowan, AFL president @ (780) 218-9888 (cell)

For full copies of the PBI analysis of the proposed ABC pension plan, visit the Alberta Federation of Labour website at www.afl.org .